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Lessons from the Disruption of News Publishing

Photo of Zach Fuller
by Zach Fuller

At the 2019 DLD conference in Munich, various media commentators were suggesting that the attention economy paradigm of news mean ominous clouds are gathering not just over new media entities such as BuzzFeed, Vice and Vox, but also those with subscription businesses. Given the seeming recalcitrance of consumers to buy multiple bundles, we may have already peaked in the number of services people are willing to purchase. It seems only a limited number of titles are meaningfully able to extract revenue from a user base, especially those applying the walled-garden approach, which treats media as a value-added service. It is therefore worth reflecting on how these entities come to rise and fall and what lessons we can glean from the ghost of media past. With that in mind, let us consider the decline of print news in the United States.

Subscriptions and circulation revenue:

With the advent of the printing press and the early news empires of the 19th century, most famously those of Citizen Kane inspiring William Randolf Hearst, newspapers spent much of the 20th century consolidating into chains. By the latter half of the century, they had become part of larger media conglomerates and were often publicly traded, with profit margins for news outlets at that stage as high as 40%.

Pause and think about that for a second, those margins were more akin to a luxury handbag than a disposable mass-produced item. Combine this with the stable costs of production (printing factories and mature distribution networks – often featuring 12-year-olds on their first job at below minimum wage) and as revenues continued to soar. Newspapers became known as a license to print money. With the benefit of hindsight, most of these profits were dutifully returned to shareholders rather than reinvesting in the product. Warren Buffett built his early fortune in part by purchasing several newspaper stocks around that time, with his company Berkshire Hathaway still owning several local news titles. As the 90s approached and at the height of their powers, hubris kicked in and news chains continued to acquire newspapers all over the country. Only this time they began to leverage debt to do so because with 40% margins and no disruptor in sight, such purchases could be swiftly paid off and profits returned to an enthusiastic investment community.

We all know what happened next. The era of the world wide web was ushered in through the 90s and wrong-footed an entire industry. The investment that had been made was in streamlining distribution to lower operating costs, not in the core product. By the late 90s, print news outlets were in a deadly predicament, one that combined high debt from acquisitions, an accelerated decline in circulation and the rise of online blogging, meaning younger news consumers were no longer purchasing or subscribing. With limited options in serving this debt and their demanding shareholder base (accustomed to the dividends of the golden age), news outlets were making cuts both in product quality and their staff, alienating potential subscribers and further accelerating the decline.


Of course, subscribers were not the only issue that began to plague news outlets at the dawn of the 21st century. Display and classified ads in the early 2000s represented up to 80% of a typical newspaper’s revenue, and while subscriptions only accounted for 10-15% of revenue, the loss of subscribers inevitably began to result in depleted advertising revenue. Combine this with the rise of free classified ads on sites such as Craigslist in the US and Gumtree in the UK and newspapers lost one of their most valuable revenue sources. Their monopoly on distribution and curated information meant they could charge considerable fees for classified ads. As soon as people were offered a free and effective alternative, they swiftly stopped paying for classified ads in the newspaper. As a result, within a decade an industry previously considered a cash-cow lost about two-thirds of its revenue.

What Can We Learn

Search and social media completely upended the distribution process. A print newspaper previously controlled content and the way consumers accessed that content because it was controlled distribution. Consumers were basically paying to be pointed to the best news. If that sounds familiar, it’s because this is what Google and Facebook do now; their value proposition for advertisers is finding the perfect target audience and shepherding them to the product. The newspaper was also curatorial, but its monopoly on the content process from end to end meant this was often secondary to the money it could extract from advertisers. Lessons that can be ascertained are now being learned from titles such as The New York Times, The Economist, The Wall Street Journal and The Washington Post, which recognise the need to emphasise the customer relationship through digital subscriptions that now include everything from podcasts and events. These should have been the investments made years ago, but under the hubris of monopoly on distribution, it is often hard to protest large profits at the time (just ask Blockbuster video executives from the 90s). Indeed, while these companies have engineered a recovery of sorts, they are competing against the diminishing returns of subscriptions, as loyal subscribers inevitably age and are not replaced by a younger base, or if they are engaged at lower price points than physical and therefore generating a lowered ARPU. This will be a slower and more manageable decline when compared to the erosion of the younger CD and DVD buying audience, but one that should not be ignored. As publishing continues to find its way in the digital era, it will continue to answer the difficult questions of what should have been done and how can it be implemented now.

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